Euro banks tap growing Dubai ABS

Dubai is set to become the gateway into Middle Eastern securitizations as a number of European-based firms take up residence in the emirate, eagerly exploring the capital market opportunities in that region.

Clifford Chance announced earlier in the month that it would be sending Partner Debashis Dey to launch a dedicated capital markets practice in the Gulf region this month. Although Clifford Chance has had a presence in this region, the bulk of the firm's work has centered on straightforward vanilla issues or sukuk (Islamic bond) financing.

The firm's current objective is to further develop the existing capital market activity in the Middle East. Clifford Chance's practice will focus on a combination of traditional and structured capital markets areas, including securitization and Islamic transactions.

Some other players

Other market participants have also headed out and established their presence in the region, exemplifying the growing opportunities there. Fitch Ratings last week said that it has started operations at its recently established Dubai offices. Moody's Investors Service also disclosed last week that it plans to send people to lay the groundwork in Dubai as well.

On the investment banking side, players like HSBC and Standard Chartered are well established in the region and already looking for potential securitization mandates, said Dey. Meanwhile, newer players like Morgan Stanley and Lehman Brothers have been sending their U.K. based securitization troops out to scout the area.

"We've also been going back and forth since February, talking to clients who really want to get a deal started," said Clifford Chance's Dey. There are still some kinks to work out, but Dey expects to see at least one true securitization emerge by the end of this year. At the moment the assets with most securitization potential are within the realm of consumer finance - auto loan receivables, leasing receivables and personal finance.

"I think most people focus on the fact that there are some ultra wealthy people in this region but there are people who lead normal lives and the banks are there to have exposure to this," said Dey. "Most have concentration limits and one way to grow a business is to securitize a portion of the book rather than sell it off because that would mean selling off the client base as well."

The United Arab Emirates' two top home loan firms, Amlak Finance and Tamweel, announced plans to float mortgage-backed bonds later this year. Amlak Finance plans to bring its $500 million mortgage-backed securitization to market later this year.

Dubai has announced plans to build a financial city in Saudi Arabia, which Clifford's Dey said offered some huge infrastructure potential. "What other place in the world can still do this?" he asked.